As you're reading this newsletter, I'm sailing on a cruise ship in the Caribbean. It's my first cruise and it's been a fun and very interesting experience.
It's not really my first cruise. I used to be in the Navy and I "cruised" a LOT during the six years I was enlisted.
While we were working our behind off on the navy ship we would sometimes have these huge cruise ships pass us. You could hear loud music coming from the ship and see all the people in their hawaiin shirts and bathing suits.
Me and my shipmates were all envious. We would wave to the people on the big cruise line and they would wave back.
Now I'm one of the passengers on the cruise ship waving back to the sailors. It's a lot more fun!
My Shocking Discovery...
While talking to several of the passengers on the cruise I found out that I paid nearly TWICE as much as they did to go on this cruise. But that wasn't the most shocking discovery. You see, I thought I got a great deal on this cruise. But after talking to several other people I discovered that they paid almost next to nothing to be on this seven-day cruise.
Of course, I bought my cruise at the last moment and most of the people I talked to purchased their cruise well in advance, I was still surprised at how low a price they paid for the cruise.
I asked myself, "How could this cruise line (Carnival) afford to give someone a nice room and all their meals and drinks for free for seven days, and still make a profit?"
Here's the Secret Strategy Behind the Carnival Cruise Lines Profit Machine...
At first glance, it's hard to imagine how Carnival and other cruise lines can make a profit. You see, almost everything is free on the ship.
The food is free (and there's LOT'S of it).
The shows are free (and the shows are great!).
The gym facilities are free (I use them every day).
The activities are free (today I'm learning how to make animals out of bath towels...it's pretty cool).
And from what I understand, there's a 1-to-3 ratio of staff to visitor. That's a LOT of staff!
But it doesn't take long after spending a few days on the "Fun Ship" to realize how Carnival makes their money
There are a lot of services that are NOT free. Stuff like...
1. The onboard casino.
2. The Internet services (that I'm using right now).
3. The photographs (they have photographers everywhere standing ready to take your picture).
4. The massage, facials, and hair treatments.
5. The liquor.
6. The onboard shops and stores.
7. The off ship excursions (they are awesome).
And a host of other services. In essence, the entire ship is one big UP SELL.
Here's an insert that came in the daily newsletter. Notice the up sell ads...
Click here to see ads -> http://url123.com/a3gag
PROOF THAT I CAN BREATHE UNDERWATER
Here's a few photos of me on an off ship excursion doing an underwater helmet dive. I didn't even get my hair wet! :-)
Click here -> http://url123.com/azkbu
Click here -> http://url123.com/azw95
And Here's Another Shocking Secret...
How much do you think it costs Carnival to feed one person on a 7 day cruise? The answer shocked me.
I asked a "person in the know" on the ship this same question. Someone who is intimately involved in the food and beverage department.
I figured it cost Carnival around $60 - $70 to feed me for 7 days. I assumed it cost them around $3 a meal. So I multiplied $3 x 3 meals a day x 7 days and got $63.
He laughed and said, "It costs us around $10 to feed you for 7 days!"
Only $10! Nah...you're joking.
Nope. Not joking. $10.
Imagine how much food Carnival buys in a month and imagine the purchasing power they have.
Well, then - - even at $300 for a $7 day cruise they're still making money. That's amazing. But even if they were losing money to get me onboard their ship, it would still be a winning deal for Carnival.
I'll estimate that after this cruise is over I will have spent over $1,500 above and beyond my initial cruise fee. (And I'm not a drinker or gambler!)
So What's the "Marketing Moral of the Story?
The Marketing Moral of the Story is...
Once you have a "Captured Customer," up sell them like crazy with backend products and services.
Four great things happen when you have additional products and services with which to up sell your customers.
Great Thing # 1
You make a LOT more money.
Great Thing # 2
Your marketing costs go down.
Great Thing # 3
If you have to, you can spend more money to capture a customer (maybe even lose money on your initial transaction).
Great Thing # 4
The more your customer buys from you, the more loyal they become.
How This Concept is Changing My Business
As we speak, I'm making changes in my business, based on the very premise that makes Carnival Cruise Lines so profitable.
Change # 1 - I'm working to develop more products. More products increases the lifetime value of a customer (assuming that my customers buy more products from me).
Change # 2 - I will be buying more advertising to reach a wider audience, both offline and online. A higher lifetime value of a customer allows me to spend more to get a customer, thus I'll be able to afford doing extensive offline advertising.
These same principles work exactly the same in your business as well. The more products and services you can sell to your customer, the more valuable they become, and the more you can spend to acquire a customer.